Q2 2022 RPT Realty Earnings Call

Greetings and welcome to RPT reality second quarter 2022 earnings conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

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Press Star Zero on your telephone keypad.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Mr. Wind Chow managing director of finance and investment.

Please go ahead.

Good morning, and thank you for joining us for Rpt's second quarter 2022 earnings Conference call. At this time management would like me to inform you that certain statements made during this conference call, which are not historical maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act <unk> 995.

Additionally statements made during the call are made as of the date of this call listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made although we believe that the expectations reflected in any forward looking statements are based on reasonable assumptions factors and risks that could cause actual results to differ from expectations.

These factors are described as risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2021, and in our earnings release for the second quarter of 2022.

These statements made on today's call also involve non-GAAP financial measures listeners are directed to our second quarter 2022, and first quarter 2022 press releases, which include definitions of those non-GAAP measures and reconciliations to the nearest GAAP measures and which are available on our website in the investors section I would now like to turn the call over to President and CEO , Brian Harper.

<unk> and CFO , Mike Fitzmaurice for their opening remarks, after which we will open the call for questions.

Thanks, Ben Good morning, and thank you for joining our call today.

Since joining the company in 2018, our team knew that this would be a turnaround story.

One that required upgrading the portfolio strengthening our cash flows implementing strong governance.

Optimizing our operations team to lease lease lease and attracting the best talent out there.

Our data driven investment and operating platforms that we put in place over the last four years allowed us to do just that.

This company has been significantly transformed.

We have significantly upgraded the portfolio quality and strengthen cash flows positioning us for exceptional operational results.

We had another excellent quarter, thanks to our outstanding team, we continue to make meaningful strides towards our strategic vision for the re imagine RPT highlighted by the accretive generational acquisition of Mary Brickell village in downtown Miami in July .

This is the 13th open Air shopping center that we have acquired in last year equating to about $840 million of value.

To put this in context, and considering our 2022 expected capital recycling activities almost 50% of our ABR will be in the top growing markets in the Boston and some regions in the country.

The transformation of the company has led to our fifth consecutive quarter.

Of year over year top and bottom line growth and we continue to experience wind at our back with operating fundamentals holding steady with a strong backlog of rents and double digit lease releasing spreads that we expect to drive growth over the next several years.

Lastly, we'd like to thank our banking partners for their support we.

We were significantly oversubscribed on our credit facility recast, which will result in improved duration and stronger liquidity.

As we've been saying for some time a relatively smaller size is an advantage.

That has allowed us to rapidly reshape our portfolio towards higher demand markets with better population growth job growth household income rent growth sales performance and essential tenancy.

All of which are important factors in this period of economic uncertainty.

And our pandemic shortened last four years and considering our remaining 22 investment goals, we have turned over 30% of the portfolio into markets like Boston, Miami, Tampa, Nashville, and Atlanta.

These markets now account for about 40% of our ABR, which has nearly doubled since 2019.

And for that same period markets, where we are over indexed like Detroit and Chicago.

Our expected to fall about 50% to a blended 14% of our ABR.

Overall, our capital recycling efforts were aligned with our buybacks.

Creatives to earnings leverage and portfolio quality, which we believe translates into superior cash flow strength.

Through this process, we have also been able to improve our tenancy, replacing weaker credit tenants with the likes of whole foods wegmans multiple T. J maxx concepts Bj's Ulta, Walmart giant I'll hold Nike and much much more.

By improving the tenancy, we get the ancillary benefit of driving cap rate compression at our centers, particularly in cases, where we're adding a grocer to a previously non grocery anchored center like at River city marketplace in Jacksonville, Highland Lakes in Tampa and train marketplace in Detroit or significantly improve.

And the existing grocery as we are doing at Crofton centre in Baltimore.

We have much more to follow at other centers as well.

Including our signed not commenced properties for which we have a grocery component will contribute of over 71% of ABR up from 65% at the end of 2019.

These efforts have created a halo effect for our small shop leasing initiatives, which helped drive cross shopping sales performance and rent growth.

This quarter, we signed 26, new small shop leases with strong national tenants like Chase Bank fifth third bank massage envy at an average ABR per square foot of $31 92.

Which is 27% above our in place small shop average.

Our small shop lease rate is now at 86, 4% up almost 3% since the end of the second quarter 2021, the strongest increase we have experienced since pre COVID-19.

I began my remarks by discussing the progress we've made in transforming our portfolio.

Key drivers of this rapid transformation had been our three unique investment platforms.

In 2021, we were the top buyer of open air shopping centers now.

Followed up this year with another $375 million of acquisitions were $223 million at our share.

During the second quarter, we closed on our on more acquisitions in the Boston MSA, including the crossings and Brookline village both.

Both are great additions to the portfolio and continue to build on our scale and Boston, which is now our second largest market based on ABR.

In July we closed on the acquisition of another first ring center through our grocery anchored joint venture platform.

Barry Brickell village is an iconic and generational asset one of the top open air centers in the country is.

This property is truly reflective of the new RPT brand offering cash flow stability visible near term growth.

<unk> long term growth potential and finally significant future value creation potential through densification.

Miami is a market that we have been actively combing for investment given the gravity of the market, which is becoming the Manhattan south with firms like Citadel Blackstone Goldman Sachs, <unk> 72, and Elliott management, all recently setting up shop in Miami and West Palm Beach.

With Mary Brickell, our Miami exposure rises to over 77% of our ABR.

Mary Brickell is all about the density which is unmatched within our portfolio as you can see from the statistics, we provided in a separate press release that we posted last night.

This is simply a great asset in a great location.

In addition to the strength of location Mary Brickell is also home to an attractive tenant lineup.

By a top performing publics that is doing more than two times of Florida average in sales per square foot.

Overall tenants do extremely well here, averaging 1100 per square foot in sales with an active 24 hour cadence fueled by a complementary mix of food and beverage service and necessity tenants.

National and regions regional tenants account for over 60% of the ABR of this center with almost six years of remaining term providing cash flow stability.

Pacemaking will be a major component for success here and we have been off to a quick start.

While we see a strong and stable lineup today, we also expect above trend NOI growth at the center, primarily driven by signed leases that have yet to commence average.

Average rent escalators of about two 5% and below market rents.

Market rents and broke will have grown by over 40% over the last decade. This is a $45 ABR per square foot center in a market where the last several tenants have signed leases over $100 per square foot.

The demand is robust.

Coupled with the fact that this behavior is more of our urban Street front setting tenant allowances will be much lower than your typical suburban shopping center.

This is a supply demand imbalance scenario at its finest.

Longer term, we believe unlocking the air above certain components of the center is where the most value could be made at the site is one of the most sizable doughnut holes remaining in the area.

Today, The center is 200000 square feet, but zoned for development of up to 80 stories and about $4 1 million square feet of residential office or hotel.

The strength of the market for each of these property types gives us significant optionality as we consider future plans.

Be sure to checkout page 44 in our investor deck.

The stats for both office and residential are staggering.

From a land perspective, we acquired Mary Brightcove for $42 million per acre, which compares favorably to a parking lot just a few blocks away. It just sold for $145 million per acre.

Although we did not acquire the property based on development value. We do see this as a material potential driver of future upside.

We believe that good things happen to good real estate and this is great real estate.

As you can clearly see we can play in multiple different sand boxes within the retail real estate ecosystem.

Scaling in our target markets amongst the first string urban types of real estate grocery anchored centers and core power centers continues to be our vision and our strategy.

Having detailed market knowledge and large GLA exposure in these markets allows us to optimize.

Our on the ground operations teams leverage our retail partners and gain access to greater deal flow on the investment front.

We will continue to be highly targeted and data driven with our capital allocation decisions in order to maximize shareholder value.

And with that I'll turn the call over to Mike to discuss our financial performance acquisition funding details balance sheet management initiatives and an updated outlook Mike.

Thanks, Brian and good morning, everyone. We're pleased to report another strong quarter highlighted by 23% operating <unk> per share growth supported by our investment activity and solid fundamentals, including strong same property NOI growth.

Re leasing spreads and a higher lease rate.

We're also very pleased with our proactive balance sheet management, allowing for optimal financial performance for several years to come.

Starting with second quarter results operating <unk> per diluted share of <unk> 27 was up <unk> over last quarter, primarily driven by higher than expected same property NOI growth of four 4% fueled by lower expenses and bad debt net of abatements, our same property NOI growth was more than impressive this quarter.

Is this the print was up against a 13, 5% level from second quarter 2021.

Leasing volume sign documents balances re leasing spreads and contractual rent increases continued to hold steady year to date, we have signed 1 million square feet, which is the strongest first half since 2016, we signed about 293000 square feet during the quarter, resulting in a leased rate of 93, 3% up 10 basis points sequentially and backstop.

By a robust signed not commenced and leases in advanced negotiation backlog balance of $10 3 million or 11 of operating <unk> per share, which is a long tail commenced through 2025, we expect <unk> to come online in the second half of 2022, seven and 2023 <unk> in 2024 and <unk>.

In 2025, given our long term embedded mark to market opportunity coupled with the age of our portfolio of over 30 years. We also continue to drive rent with our 40 <unk> consecutive quarter of positive rent growth with our blended spreads coming in at 14% for the quarter annual contractual rent increases were also compelling.

For signed leases during the quarter coming in at about 200 basis points.

We ended the first quarter with net debt to annualized adjusted EBITDA of seven one times, including our leasing backlog of $10 3 million, our leverage would be about a half turn better at six six times, our leverages elevated this quarter as a result of the timing of acquisitions and dispositions in line with expectations, we will effectively.

<unk> fund acquisitions with dispositions, including contributions to our joint venture platforms. We also have $17 million afford equity that we judiciously raised in the first quarter that is yet to be settled as well.

In regard to funding acquisitions dispositions represent our most efficient source of capital and our timely execution has allowed us to achieve optimal value for these assets since the end of the first quarter. We closed on the sale of two assets, including River town Square in Deerfield Beach, Florida until 12 in Detroit.

We were able to obtain attractive pricing on both assets, where we felt we had harvested full value with combined occupancy of 96%.

In the case of River town, we were able to reduce our exposure to weaker credits with long term leases <unk> well sell 12, we were able to realize $84 million of total value between the previous parcel sales of Loews and Myers to our net lease platform and the sale of the remaining property in the total value for the two sales was about.

$8 million higher than if we sold the assets together highlighting the synergy between our investment platform.

We also recently went under contract to sell Mount Prospect Plaza in Chicago for $35 million that we expect to close in the third quarter subject to customary closing conditions.

Following the sale, we will have reduced our Chicago exposure to just one asset finally, we've agreed to terms contribute to Midwest properties into our grocery anchored joint venture platform Troy marketplace in Detroit and shops on lane in Columbus, Ohio, both centers are highly quality assets, but considering our Midwest exposure and the.

Meaning full dislocation between public and private valuations, we believe that contributing these properties is in the best interest of both our shareholders and our joint venture partner.

Our measure of capital allocation approach has allowed us to trade highly occupied Midwest cash flows are collectively stronger higher growth cash flows and Boston and Miami as we our IRR driven buyers. This was done on an accretive basis. However for the second clarity our year one.

Yield is expected to be about neutral due to three reasons.

One we took advantage of the significant dislocation between private and public valuation and optimize pricing for our asset sales was traded nearly 300 basis points inside of our implied cap rate based on where our stock is trading today.

A few of the asset sales were contributed to our JV platforms, which created additional management fees and three we were able to contribute select components of our open air centers to our net lease platform, resulting in enhanced yields on the remaining portion of the center that we kept on balance sheet.

All three were direct benefit to lowering our cost of capital, enabling us to continue to transform our portfolio quality and an accretive measured manner.

Turning to our financing activities one of our core principles is to be proactive with our liability management to support our growth initiatives as well as to protect the company during uncertain economic times, so that and I am thrilled to announce that we have received binding commitments for an $810 million amended and restated unsecured sulfur based credit facility.

An increase of about $150 million over our existing unsecured credit facility.

Facility consists of a $500 million unsecured revolving line of credit and $310 million of term loans. As a result of this recast we will enhance our liquidity lower debt costs eliminate near term debt maturities through 2024 and increase our weighted average debt maturity by approximately one year.

I'm also happy to report that this new facility. The first time, we have tied our ESG initiatives directly into our financing options. We expect to close on the facility early August subject to satisfaction of customary closing conditions and.

And lastly move down the guidance due to our above plan operational performance during the quarter. We are raising the low end of our same property NOI growth guidance by 50 basis points to 3% to 4%, while maintaining our operating <unk> per share range consistent at 101 to 105.

We do expect our year over year same property base rent growth to accelerate in the back half of the year as our ethanol backlog comes online, but given tougher bad debt comps that include prior period reversals in 2021, we expect same property NOI growth decelerate for the remainder of the year.

Also as a reminder, we have not forecasted any favorable or unfavorable adjustment from prior year bad debt estimates in our 2022 guidance.

Lastly, we are not increasing our acquisitions or dispositions guidance at this time. However, we will not sit idle and will continue to strive to identify opportunities in which RPT is positioned to add value in an accretive measured manner and with that I'll turn the call back to the operator to open the line for questions.

Thank you.

Ladies and gentlemen at this time, we will be conducting a question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad.

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All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keith.

One moment, please while we poll for questions.

Our first question is from the line of Derek Johnston.

From Deutsche Bank. Please go ahead.

Hi, everybody good morning.

So I see occupancy decrease for the third quarter in a row.

Looking on lower anchor.

I think you may have telegraphed this Brian in the past, but spa.

Specifically, how are you balancing rent versus occupancy.

And are you aggressively taking back space here, how are you thinking about.

That balance.

Hi, Derek Good morning. This is Mike you're right. We did telegraph this at the outset of the year that we are going to.

Correctly take back several spaces during the year to upgrade tenancy in the merchandising mix at several centers, which we've been doing for the last several years. So we did experience.

Acceleration in our lease rate, though which was up during the quarter to about 93, 3%.

But as you noted we did see the occupied rate come down a bit during the quarter. We took back a couple of spaces. One of long term struggling tenants and one of our assets in Florida that is very well located in the center that we want to upgrade through with a better grocer and the other one was in connection with our redevelopment project at our crossroads.

In Florida, as well, where we demo.

Publix and we're in the process of rebuilding that into a publix flagship store, which will open I believe in the second quarter of next year, but the flight pattern from here is that occupancy will hold steady for the remaining part of the year with signed not commenced coming online partially offset by a space we've taken back at our Jacksonville.

Asset, it's a Regal theater that we've already back filled are already signed a lease for excuse me with Bj's wholesale that will open at the end of 'twenty. Four so very excited about that trade off cash flows from a credit perspective, the last point I'd make is.

Should absolutely see our lease rate.

Over 94% by the end of the year, which kind of gives you that directional confidence that we can get this portfolio to 90, 596% over the long term.

Alright, great. Thanks.

And then guys on acquisitions.

This is Mary Brickell property. It is a high quality asset it's in one of the best Submarkets in Miami.

Kind of have to think what kind of cap rate was underwritten here.

I have to imagine this was a marketed deal. So did you guys have to go over the top here.

Or another way like what advantage did your team have to win this deal. Thank you.

Thanks Derek.

Yes, I wont get into cap rates, just not appropriate given the 78% occupancy with upside in rents really now being done at a $117 a square foot and a $45 ABR market. So massive upside on that it's really underwritten to an 8% Unlevered IRR that's without.

Any densification, which won't come on for several years down the road.

We have upwards of two 5% to 3% escalators embedded in that so we really saw just massive potential of not only the curation, but long term.

Rent growth on this asset and the Densification is just icing this was very competitive.

And I can tell you.

The fact that as previously mentioned, we establish our JV with GIC in 2019. It wasn't about just the capital it was about partnering with intellectual capital and astute investors that have a global reach they see billions upon billions of deal flow in both the equity and debt markets.

We have deep relationships they have global ones we.

Afterwards, but the regarding the space Recaptures that you discussed I think it was about 200000 square feet that you had sort of identified and targeted at the beginning of the year and I think the majority of that was expected to come offline in <unk> and <unk> This year.

How much took place already prior to the end of <unk> I guess, how much more is there to go there and just trying to get a little bit of a better understanding there on the impact it might have on on occupancy rates.

Yes, Paul.

Yes, sure yes today, it's I mean, we've said about 150000 square feet.

Capture for the first few quarters.

To your point Q3 will be another quarter, where we're going to see approximately call. It 90000 square feet over three spaces that we're going to take back in all three of these bases have been released one Ben been released a total wine and open up in the third quarter of 23, one is the bj's lease that I referenced earlier, that's going to open in the first half of 2024.

And then were taken back one of our space.

One of our Boston assets and released Institute TGF concept, so very very very strong upgrade in our.

Occupancy, but that's going to cause our occupancy to kind of hold steady given the.

Offset with us in Oakland online towards the end of the year. So you should finish the year right around kind of where we're at today, Todd, but again I would I would focus more on the lease rate, which we think is going to be north of 94%.

That will really hold steady for the rest of the year and provide more occupancy upside in 'twenty three and 'twenty four.

Okay alright, thank you.

Yep. Thank you.

Thank you. Our next question comes from the line of Handel St. Juste from Mizuho. Please go ahead.

Hi, Good morning, this is Ravi.

Hope you guys are doing well.

With leverage North of <unk> should we expect you to be net sellers in the second half of 2022 what is your balance sheet philosophy here.

They're leveraging that is bad for a recession.

And what's your target leverage and what's the time horizon.

Paul.

Hey, good morning Ravi.

Good to hear good to hear your voice and congratulations on the new role.

Yes, we did end the quarter at seven one times.

That was that was a bit elevated given the timing of acquisitions and dispositions. So.

To your point, we will be net sellers in the second half of the year, but we should end the year in the high sixes.

And then as signed not commenced does come online over 23% and 24 will naturally get to the low <unk> and Thats, where im comfortable given the strength of the cash flows, especially as it relates to the improvement we've made in our geographic exposure and our focused leasing efforts on our central Tennessee like bringing in groceries.

And two non grocery centers.

Also worth mentioning that leverage is just one element of the balance sheet. The other element. Our second prong is I would call it as liability management.

We've been very proactive on that front for the last several years and once we're done with our recast here in the next couple of weeks of our credit facility, we're going to have zero debt maturing.

Through 2024, and then the last prong.

As floating rate risk, 100% of our term loan debt is currently hedged today. So we have minimal interest expense.

Warner ability there.

The vast vast majority of our debt has a fixed rate basis. So when you kind of add it all up I feel really really good about the balance sheet strength and where it's going.

Thank you that's helpful.

One more here you've.

You've done a great job getting the yes.

It's an old ABR online at a time and batch.

Faster.

Anticipated, but looking forward do you think theres going to be any signs of store opening delays.

Or anything like that given labor shortages any supply chain problems.

We're believes are focused on that and really an embedded in our leases we take more of a conservative approach with longer lead times and that's embedded into the guidance.

So we actually hope for some more upside as we kind of get the and the operations team from leasing tenant coordination and asset management are all doing a great job coordinating with the tenants and municipalities potentially even open sooner. So we took more of a cautious view with this.

<unk> mine of supply chain, and hopefully, we'll beat those targets and leases and get these tenants online and open.

Thank you.

Thank you.

Thank you our.

Our next question comes from the line of tail Okusanya.

From Credit Suisse. Please go ahead.

Hopefully I didn't Miss this details, but did you give us any information about what the pricing on the new line of credit would be and also on the term loans.

Yes credit credit spreads come in coming in at about 10 basis points.

Where they currently are at today and that's just given the change of term we're going from more seven year to five year term, so that lowered the spread a bit for us and again, we've talked about in the past, we're 100% hedged on all the term loans today. The first time, we have suddenly come up.

Hedges until 2023, which is about $60 million of our term loans and that current rate.

That hedge is about 3%.

Were to hedge does that today, which are not interested in doing.

Until the world gets into a more normal environment that would be about 3333 in about 353, 75%. So it's not too much.

The ramp from where it's at today.

But the rate on the term loan the new term loan just specifically.

How much.

It's about 10 basis points.

Yes.

Sure.

Okay. Okay. That's helpful.

<unk>.

And then just kind of following up.

The whole question about.

Kind of opportunities to really put capital to work across the three platforms kind of given the cost of capital.

Again.

Just talking about brickell.

And.

Get the point about 78% occupancy looking at cap rates may not matter or things like that but it is the worst.

The kind of deals done today.

Looking at value add projects like this.

Maybe it's dilutive or maybe even.

Neutral.

But when you kind of took other guys over an investment cycle and then look at upside opportunities.

<unk> got to underwrite these things.

High single digit.

That makes more sense, but maybe it is not alone.

<unk> boost what I'm doing such deals.

I think it's a combination.

With our geographic focus laser it into our top core markets.

It's a combination of these types of deals and frankly than the north frozen Boston of the World, where we bought that wegmans and Bj's anchor deal.

With three T. J Maxx concepts, we've done two more since the acquisition <unk> will be the only center in the country with all five <unk> brands.

And by the time those two tenants open.

We're left with it and after the spin off to <unk>.

A few of those parcels were left with that 10% yield for RPT shareholders that consists of almost 70% investment grade tenants.

With a much stronger growth CAGR of four 5%.

Yeah.

So.

That is still very very attractive.

At the end of the day, we want resilient cash flows and our top core markets with the highest unlevered return possible.

Period.

So I think with the three platforms. That's why we set it up and that gives us optionality that a lot of that really the peer set doesn't have yes.

And then we can go back very Brooklyn, all the growth opportunities that we have there.

That's pretty darn compelling when you look at the signed not commenced that's yet to come online like I told Todd a few months ago.

75 to 100 basis points expansion of cap rates, there, Brian talk greatly about the mark to market opportunities going from $45 200 over the long term.

Contractual rent increases of 250 basis points, which is about 100 basis points wider where our portfolio is that it continues to push that that gets us to that high single digit.

IRR that we continue to target and that's the other way to get there is through asset buys like that on top of that we get the management fee. So it's pretty compelling.

And to Brian's point to be able to have that option and then the options within our jv's.

I guess, just finally, the Brickell City center seems to have.

More looks more goods focus.

Is it.

Do you see that much of a competitor of type of tenants you are going after.

No completely different this is very community driven and this is very heavily landscape thats really serves as an oasis in the heart of this urban.

Really city that's undergoing.

Huge growth so we really serve us.

A large dwell time.

For our community I think it's roughly a little a little over two and a half hours of average dwell.

So completely different.

<unk> and tenancy that an enclosed mall at city center, but that mall is doing extremely well as well.

Great. Thanks, Thanks for that.

Thank you.

Thank you.

Next question is from the line of Florida's Van <unk> from Compass point. Please go ahead.

Hey, guys. Thanks for taking my question I'm wondering did.

Ken Ken Bernstein give you guys.

I just hope you a drink.

The benefits of street retail here.

No.

And they do a very nice job obviously in.

Retailers speak to us for us how deep our relationships are with the retailers retailers point us to these acquisitions.

Were smart.

But we're not in the in the heads of retailers, we use them with our relationships to point us to acquisitions like this.

So.

Another first ring deal off the heels of Brookline in Boston and can see more.

More in the future.

Yes, I was going to get to that so actually let me just finish up the thinking.

Brickell.

I've actually recently was there.

It is it's a nice looking centered theres lot of vacancy, but obviously thats being built so that's been very encouraging.

The air rights.

Leave your site sits on both sides.

South Miami.

The air rights.

The.

The east side of the of the street or are they over the bulk of where the existing center is which is where the publics as well on the west side.

The $4 1 million square feet of <unk>.

<unk> square footage is on both the east and west side on the parcels, including the whole entire five acres, which are both sides of the street.

Its both okay. So I'm just thinking about I know you talked about this being six years down the road, but.

Would it require you to take.

Take down existing stuff or can you.

Structure in place where you can build.

On top of things or are there.

It seemed like most of the space that you have is already filled out so does it require you to take down existing buildings.

It's a little bit of both frankly.

It would require some.

The building is to go down, but again that's years away and we're working with.

Top.

We will begin working with a top residential developer for initial concept plans.

Six or seven years down the road, where we can embark on that which obviously would create a lot of value creation, just given the demand in residential that's only getting better in that market and frankly, even the demand for office 200000 square foot office.

Tenant thats going in across the street on a new construction building just been signed for $160 a square foot.

So we are really bullish but right now our focus is as lease lease lease and.

Embarking on kind of re merchandising and curation of this asset.

Great. Thanks, Brian maybe also if you could touch upon the cap rates on the two assets to Columbus I think in Detroit assets contributed were contributed to the.

To your to your JV.

Yes at this point, Florida comment on cap rates for variety of reasons, both Mike what I will tell you and as I mentioned in my or did mentioned in my prepared remarks, if you look across what we acquired this year in Boston, The Portsmouth asset and then Mary Brickell here recently against the dispositions.

In Chicago Detroit.

<unk> contributions.

One in Detroit, one and one in Ohio.

While asset in Florida that we sold it was all funded.

On a neutral basis.

And from an IRR perspective, we absolutely think that we're buying.

Growth here.

Type assets that will support the.

Outside of the growth of the company over the coming years.

Thanks, Mike and then maybe the last one.

You touched upon it briefly Brookline small acquisition of street retail $5 million.

Can we expect more of these things or I mean, whats the benefit of having just one small sure.

Certainly.

The value is consolidating and creating a portfolio in that submarket or submarkets around that so again, it's the highest and best use on our capital highest unlevered returns that particular asset had I think the top Starbucks in the region.

With a lot of tenant demand.

A lot of mom and pop owners, where lower LOE.

ABR existing so huge mark to market in place.

So it's a business we like but at the same time were evaluating that compared to other investment opportunities across our core markets.

But it would not be so we should not be surprised if you were to have more of these kinds of acquisitions either in brookline or mutant.

Or some of the neighboring.

Yes, that's correct.

Correct, if the Unlevered returns are there absolutely.

Great. Thanks, guys.

Yes.

Thank you.

Our next question is from the line of Hong Zhang.

J P. Morgan. Please go ahead.

Yeah, Hey, guys I think you've laid out a long term occupancy target of 90, 495%, but it sounds like occupancy will be relatively stable.

For the remainder of the year could you talk a little bit about the trajectory of occupancy growth and when you think you'll hit that target.

Yes, good morning, Hong.

Yes, it looks like as we telegraphed over the last several quarters, we did plan on <unk>.

Back several spaces this year in connection with our re merchandising initiatives.

Grading tenancy at double digit yields.

Our team is doing a fantastic job in that.

Proving the tenancy at each of those centers and really focused on more of the grocery business and the central tendency. So very pleased that effort and that youll see that in the leased rate by the end of the year will be north of 94%.

It gives you that directional pathway to the 90, 596% that we hope to get over the long term and in terms of a target date I would say late 'twenty four 'twenty five is when we start seeing the mid nineties 90 number and thats going to be largely driven by our small shop lease up.

We were at 86% leased which is just a couple of percent shy of where we were at at the end of 2019, and we have a much better portfolio than we.

We did then is Brian remarked in his prepared remarks that we've turned over about 30% of the portfolio and we believe that number will get to 90, 192% over time, probably in the same timeframe as the 'twenty four 'twenty five timeframe.

Got it and I'll curiosity youre.

So you are contributing to grocery anchored assets to the to the joint venture. Later this year are there any other properties that fit the criteria that could be essentially contributed at a later point in time as well sure sure.

I think the contribution than wood.

But most likely the proceeds will go to balance sheet.

Yeah.

Where we can grow in an accretive manner. So again. This is a unique instrument a unique partnership that when the cost of capital is not there we can look to our venture platforms and extract.

The appropriate accretive yield.

For the company.

Okay. Thank you.

Yes. Thanks.

Yeah.

Thank you.

Our next question comes from the line of Linda Tsai from Jefferies. Please go ahead.

Hi, It seems like you had a solid quarter with execution on all fronts in the second quarter, you increased same store NOI guidance.

Why didn't you raised earnings guidance.

Does it have to do with the occupancy coming offline, where the impact of Mary <unk>.

No no not at all.

Not at all I mean.

Both of those.

Set the transactions the planned Recaptures and Mary brick was all embedded within within our guidance over the year as far as the remaining part of the year not lifting guide at this point in time I just think.

We're cautious and sort of an uncertain environment. So we're going to sit where we're at right now we feel pretty good about.

Yes.

Got it and then I realized Mary Brickell, the trophy asset, but if you look at the original assets your JV with GIC three of which were in Florida, one in Missouri, one in Michigan at the timing those are considered kind of averaging quality relative to your overall portfolio, but given the changes you've made over the past few years, how do you think about the quality of those assets today.

Of the original assets we've greatly.

Improved tremendously.

From.

Boca Raton Mission Bay, where we've done a large amount of leasing and we're adding a very very.

Well known medical use that will be signed here shortly.

Palm Beach and Crossroads, that's one of the re merchandising efforts that Mike referenced.

Where the publics that is being redeveloped into a flagship <unk> will come online next year.

Coral Creek I believe 98% leased Publix is doing phenomenal sales, we have done a great job of small shop leasing.

Counting country, where we did bought.

Stein Mart box, we replace that with signed leases with Rei, We just opened this week.

Signed lease with Sephora assigned lease with Chase add.

Im godly huge.

The rent spreads.

We've done deals with Athleta to go next Homegoods, so really create curated that property.

B higher end for that wealthy consumer in that market of St. Louis.

And then old Orchard.

Plum market, it's really just been.

Healthy good CAGR with strong sales from the grocer and we've been periodically getting a tenant or two at renewal with no options and replacing them at significantly higher rates.

So not speaking for our partner <unk>.

We've been extremely happy with the results of that original seeding of the assets and have improved the cash flows and the credits of each of those assets.

Okay.

Yes.

Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session.

Now I would like to turn the call back to Mr. Brian <unk>, CEO and president for closing remarks.

Thank you operator, so the second quarter was another active one for RPT and although we remain cautious about the macro environment given the rapid rise in rates and inflation, we are optimistic about our business.

Our strong performance is reflective of the dramatic improvements in the quality of our cash flows as a result of the portfolio reshaping that has taken place over the past few years, while our joint venture platforms are providing us with observable competitive advantages.

Combined with our proactive liability management, we believe that RPT is very well positioned to perform in any environment and are excited about the future. Thank.

Thank you all for joining this call have a wonderful day.

Okay.

Thank you.

The conference of RPT reality has now concluded. Thank you for your participation you may now disconnect your lines.

Okay.

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